Pulling The Hook On The Minnow

For anyone tracking Moody's rating of HMH Riverdeep debt, you have reached the end of the line. Moody's has dropped their rating of the debt completely. It suggests that they think all of HMH's debt is too high risk to consider.

Anyone hoping to invest in the little minnow that's choking on the Harcourt/Houghton Mifflin whale is to be advised that Moody's expects HMH Riverdeep to default on up to $6.4 billion owed to creditors.

Moody's considered everything, from the position of HMH Riverdeep in the overall market, the projected income that could pay off all that debt, and the experience of management in handling such a scenario.

Not impressed was the investment ratings service, not impressed and not hopeful that Barry O'Callaghan can fully digest all that he's bitten off. He created the largest educational publishing materials firm in the world, but it's built on debt and that's a foundation as stable as sand.

Already hard-pressed for money, HMH Riverdeep will have to pay through the nose to borrow more. The higher the risk, the higher the interest rate that an investor will demand. If Moody's figures HMH Riverdeep for default, hedge funds and capital markets are going to demand enormous returns on their investment, if they're willing to take a chance at all.

With sales of $2.1 billion, expensive debt, and anticipated cuts in school district budgets, the minnow is floundering.